INDIA RUPEE-Rupee drops as dollar rallies; key U.S. jobs data awaited

By Anushka Trivedi

MUMBAI, Jan 6 (Reuters) - The Indian rupee weakened on Friday, amid a slide in domestic equities, as the dollar index jumped after strong U.S. data overnight fanned expectations of further monetary tightening from the Federal Reserve.

The rupee INR=IN ended the session at 82.72 per dollar, compared with its previous close of 82.5550, and gave up most of Thursday's gains of 0.31%. For the week, the currency ended largely unchanged.

"The dollar is gaining ... and we're seeing the rupee react to a selloff in equities," said Gaurang Somaiya, FX and bullion analyst at Motilal Oswal Financial Services.

As long as the broader range of 82.20-83.20 is taken out, we may see a clear trend emerge. The trajectory remains to "buy on dips" in the USD/INR as a move to the higher side may continue, Somaiya added.

The pressure on the rupee was likely to sustain through the year due to a high current account deficit and the currency may underperform its major Asian emerging market peers, a senior executive at BNP Paribas told Reuters.

On Friday, Indian equities .NSEI fell for a third straight day, with some about the upcoming earnings season creeping in. .BO

Meanwhile, the dollar index =USD held a one-month high after jumping 1% overnight following U.S. data that highlighted a still-tight labour market.

The index is on track for its biggest weekly gain since September.

The closely watched -farm payrolls report is due later in the day. A better-than-expected reading will make it more likely that the Fed does downshift to a 25 basis points (bps) rate hike and instead raises rates by 50 bps on Feb. 1, according to analysts.

(Reporting by Anushka Trivedi; Editing by Savio D'Souza)

((anushka.trivedi@thomsonreuters.com; Reuters Messaging: anushka.trivedi.thomsonreuters.com@reuters.))